How Do You Stack Up When It Comes to Retirement?

A retired couple smile while relaxing on deck chairs at a beach.

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There's something about statistics that gets me energized, even on a weekday! I particularly enjoy comparing myself to others and understanding how I measure up. It's only natural to want to know if you're average or above average. This knowledge helps you gauge your position and serves as a valuable reminder of what the future may hold. As a financial planner, understanding retirement averages like these can truly assist both you and me in planning for the future.

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So, let me share with you my thoughts on some intriguing figures I recently came across in a Wall Street Journal article titled Here’s What Retirement Looks Like in America in Six Charts (paywall).

Statistic #1: Retirement account savings

Let's start with retirement savings balances. For individuals age 65 and above, the average balance is $407,581, according to the Employee Benefit Research Institute. Only 17.3% of this age group have balances of $700,000 or more, with 11.6% having $1 million or more. Generally, the highest balances are seen among those age 55-64.

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My thoughts: To begin with, I wouldn't classify our clients as average. So, if you're reading this and feeling good about your situation, know that there's much more to it than these averages. Our clients are typically on the higher end of the spectrum since accumulating more wealth often leads to seeking professional assistance.

That being said, the right answer for you depends on your retirement needs. If you're an "average" investor in America, you can probably expect to withdraw around $20,000 per year before taxes. If your needs are greater, you'll likely require higher amounts. This statistic concerns me the most but doesn't come as a surprise. We have a savings issue in this country, so I'm not astonished to read these figures.

Considering the previous statistics, it's no surprise that a significant portion of our population heavily relies on Social Security. About 90% of individuals claim their benefits by the age of 65, and the average benefit amount is $1,825 per month, according to the Social Security Administration.

My thoughts: Social Security is a substantial resource for retirees. Even with the average benefit, assuming both individuals in a couple worked, you can expect over $40,000 of retirement income from Social Security alone. If you're at the higher end of the spectrum, these figures can roughly double.

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Remember, Social Security benefits are calculated based on your highest 35 years of earnings. This statistic also emphasizes the critical importance of working with someone to optimize your Social Security benefits. There are various factors to consider, such as when to start claiming, which can make a significant difference in your retirement plan.

Statistic #3: Health expenses

One of the most daunting concerns for retirees is healthcare expenses. According to the Bureau of Labor Statistics, individuals age 65 or older spend an average of $7,030 per year on healthcare. This number tends to increase as one gets older. The breakdown of this amount includes $4,974 on health insurance, $1,077 on medical services, $726 on medications and $253 on medical supplies.

My thoughts: As you can see, if you're married and retired, you're likely spending about $14,000 or more per year on healthcare expenses alone. Keep in mind that these figures represent averages, and if you anticipate having higher healthcare needs, you could easily be looking at allocating $20,000 or more annually for your health expenses.

The most important thing to acknowledge is that you shouldn't overlook these costs in your retirement planning. During our working years, we often don't pay close attention to healthcare costs since insurance coverage is typically provided through our jobs, and the rest may not be a significant concern year after year. However, in retirement, these costs become a major contributor to your budget.

Statistic #4: Average day for a retiree

This is, by far, my favorite statistic, from the U.S. Bureau of Labor Statistics American Time Use Survey, because I've never seen it broken down like this before. So, how does the average retiree spend a 24-hour day?

9.01 hours sleeping
6.24 hours of relaxation and leisure
4.5 hours watching TV
1.86 hours eating, drinking and grooming
The rest is allocated to housework, caregiving, exercise and work.

My thoughts: Isn't this thought-provoking? You work for 40 years, only to retire and spend over half of your days sleeping or watching TV? Now, as someone who finds that idea delightful, it may sound like an amazing day to me. However, if you were to ask the average pre-retiree about their ideal retirement, it probably wouldn't involve watching a 30-minute show followed by the epic film Lawrence of Arabia (trust me, I did a seventh-grade history report on that movie, and I wouldn't wish it on anyone).

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My takeaway from this study: Before retirement, start pursuing hobbies and passions that interest you. I've written about this in my retirement dating blog, but it's important to start exploring activities today to determine how you want to spend your golden years. If you do this, your retirement years will truly be golden.

How average are you?

Isn't it fun? The WSJ article includes a few other statistics, like average net worth ($1,217,700 for individuals age 65-74), but I thought the four statistics I highlighted above already painted an interesting picture. I hope you found them as fascinating as I did.

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Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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In March 2010, Andrew Rosen joined Diversified, bringing with him nine years of financial industry experience. As a financial planner, Andrew forges lifelong relationships with clients, coaching them through all stages of life. He has obtained his Series 6, 7 and 63, along with property/casualty and health/life insurance licenses. Andrew consistently delivers high-level, concierge service to all clients.